Interviewing Clem Sunter on his latest book, Flag Watching, gave me the ideal opportunity to dig into the world-famous futurist’s perspective on South Africa and the world. Appropriately, the interview was conducted the day before a high-profile public debate in Cape Town between the former head of Anglo American’s Gold Division and EFF leader Julius Malema. Our chat provided a fascinating half hour in which Sunter explains why he shares many of the same ideals as Malema – and provides the most cogent argument you’ll hear of how to boost employment and stimulate economic growth. Sunter’s brilliant and creative mind at its best. He remains a national asset who should be better applied. – Alec Hogg

Clem Sunter is with Alec Hogg in the studio. Are you still living in Johannesburg?

Nope. I now live between Somerset West and Simonstown. I still work up here twice a month. I come up most of the week and I do a little bit of work overseas but yes, I’m taking in the mountains now.

Then you met up with Chantell Ilsbury and told us about foxes and hedgehogs. I did a piece in fact, this week where George Soros calls himself a hedgehog – proudly – also from Irvine Berlin. He says that nowadays it’s so difficult to have many ideas. He just wants one big idea. You’re still propagating foxes?

Absolutely. Interestingly, when we wrote ‘The mind of a Fox’ in June 2001 we were saying that because the world is mainly beyond your control as an individual and also, it’s very uncertain; it’s better to approach the future with different scenarios and different ideas rather than pin your hopes on a single forecast. That was why we talked of foxes and hedgehogs but the other reason was that foxes are very agile animals so when they spot a particular scenario coming into play, they respond with an adaption of their strategy. We wrote that book two years before a survey was done in America of professional forecasts, which showed that on the whole, foxes outperform hedgehogs in terms of the forecasting trade.

I guess Soros is talking more from an investor’s perspective: he takes the view that there’s going to be deflation in the world – I’d love to get your insights into that…

Yes. Look, my point is this (because Jim Collins wrote ‘Good to great’ where he said the great companies focus on a particular vision and they really ignore everything else): I’m not saying that you shouldn’t focus when you’re running a business, but you should have that radar system that is able to capture different possible futures and when they start occurring against expectation, that you have that ability to adapt. That’s what foxes are really capable of: they adapt their strategy when times call for it. They’re not like hedgehogs who will see a flag, look at it and say, “No, this one’s not for me” and often end up losing huge money.

Well, Chantell and I have been writing books together. We did three and we call it the Fox Trilogy. We didn’t just do the original book on the difference between a hedgehog and a fox. We then turned it into a methodology by which you can have a discussion about the future inside your business and indeed, we use it when we consult. Various books have been brought out of the articles that I write for News24 since then, but this is the first real…not change in methodology, but adaptation of methodology in the book that I published in November, called Flag Watching. What Chantell and I found is that people are really interested in the flags currently changing their game before they consider hypothetical futures, which are the scenarios. We now put a lot of emphasis on the flags and particularly, “What are the flags, which would suggest that a scenario is coming into play?”

The famous one that made us as two authors was in The mind of a fox we had a letter to Bush in which we said that part of his legacy as President would be determined by the speed and quality of is response to certain extreme futures. We mentioned (as probably his number one extreme future) a massive terrorist strike on a Western city and it happened three months after we published the book. The reason we ranked it so high was because of three flags. (1) The growing conflict between religions, which started in the late 80’s and intensified in the 90’s. (2) The growing sophistication of movements dedicated to the downfall of the west (and particularly America). (3) The two attacks by Al Qaeda on American embassies in Africa in 1998, in Tanzania and Kenya. It was a very good example of the use of flags because those flags really suggested that maybe, terrorists were going to up the ante and attack west on western soil.

The whole 9/11 story: although you didn’t specifically say it was going to happen, you gave the scenario. Did that lead to you being tapped by people around the world?

I don’t know.

Not many people predicted that.

No, it wasn’t. In fact, I think the Americans found out that we were the only book published in 2001, prior to 9/11 that in a formal letter to the President said, “This is a possibility.” As you correctly say, we didn’t make it a prediction and certainly, we didn’t know that it was going to be New York Twin Towers and September 11th. You need inside information for that but the idea that the terrorists would up the ante by attacking the west on western soil… Just consider this, Alec. In the 2000 campaign that got Bush elected, the word ‘terrorism’ was only mentioned once by any candidate so it was right off the radar screen and that’s the whole point of being a fox and looking out at the possibilities and the flags. It’s to say, “Actually, here are a few flags suggesting that something quite dramatic could happen.”

If you ask me right now what the next change in the game of terrorism could be, it’s drone technology and the fact that everybody’s using drones. I just feel that there has to be a counter-strategy to the use of drones by terrorist groups.

To understand flags, I’d like to take you back to your old industry – Head of the Gold and Uranium Division at Anglo American. We’ve seen (in December) that your old company is going from 135,000 people down to 50,000. If you’d still been working there, would you have maybe seen things differently?

It’s mentioned in Flag Watching. We had one flag to suggest that commodities would have a very long downturn. It’s the grey flag and how it’s affecting China. The One Child policy that China implemented in 1978 has meant that they’re now one of the fastest-aging populations in the world. Not the oldest, but the fastest-aging populations. For at least ten years, we’ve been saying that is going to slow down Chinese economic growth and this has to impact commodities and oil because China’s responsible for 80 percent of the growth and demand for these products and there’s nobody to replace China. Everybody talks about India, but India’s 15 to 20 years away from being the size of the Chinese economy. Yes, I would have put that on the table if I’d been invited to a strategy session at Anglo. The real point Alec, is that you cannot predict the extremity of the consequence.

Absolutely. You could do more to prepare for the bad times but I don’t want to oversell the flag methodology by saying that you can actually capture the fact that oil will go down to $30. We were very negative on the oil price when it was $100.00 and we were negative on all commodity prices (and that’s the point of being a fox) and yes, one would have said, “What are the critical strategic and tactical options that will have to be implemented in light of the scenario increasing in probability?”

Did anyone get it right around the world? I think for a moment of the Norwegian Sovereign Wealth Fund where they shoveled a lot of their oil money into a reserve. There aren’t too many examples.

No, and it’s not like the 2008 crash where there were people who captured the idea that sub-prime mortgages would become worthless. I’m not sure that anybody’s really captured this particular crisis and it is amazing how even now, you have people saying ‘don’t worry. It’s going to be over soon’. I’m not saying that the extremity of the markets won’t correct themselves but I think we’re in for very tough economic times for the remainder of this decade. It affects the South African scenarios because obviously, our economy is very closely correlated to the global economy since the Second World War. For us to really start transforming our economy against the backdrop of a tough global economy (and I see the Chairlady of the Fed has come out with some fairly negative comments about clouds gathering at her testimony to Congress yesterday), there are some real red flags around.

One of them being of course, that a lot of the fracking companies’ projects probably break even at $60.00 per barrel and here we are at $30.00. You have to look at the consequences of a flag.

They may, but the fact is that the whole point of the flag system is to weigh up the risks versus the opportunities. The opportunities for new technologies now are probably bigger than they’ve ever been because necessity is the mother of invention and if you ask me what the next big thing is going to be, it’s smart energy – moving away from oil. Having said that, you’ve also got to consider the risk climate as a result of the flags and I would say right now, the global economy is not quite back to where it was in 2006/2007 because we have the knowledge of that period, and so people are more sensitive to it. I would say that the risks are definitely higher now.

Coming home to South Africa, renewable energy is one thing that we’ve done quite well here. Of course, we also have the proposed nuclear program. What flags are waving very vigorously now for this country?

Well, in terms of the work Chantell and I do with companies, quality of infrastructure figures very highly on that list and particularly the fact that if you need a three to five percent economic growth rate, we’ve got to have a much more responsible approach to (a) maintaining our existing infrastructure and (b) providing new infrastructure. Personally, I think Eskom is showing a greenish flag now under Brian Molefe. I think that the spirit is improved and I think that the two big projects – Medupi and Kusile – are on track. Outside of the main road network between the cities, I think the state of our roads is a cause for concern so that’s a flag. Are we now really, seriously going to improve it by hiring the right contractors and doing all that or are we just going to allow it to continue to decline? In that case, there is very little chance of a three to five percent economic growth rate.

The second flag is around leadership and creating a united team because you cannot compete if you’re all divided. Nelson Mandela was very good at bringing people together. We haven’t had much success since then so I guess we’re going to have to look at the next generation of leadership to provide that kind of inclusivity, which will mean that our nation can thrive; particularly if the global economy is going to be tough.

Yes, it definitely is a nice flag, that we’re now seeing this type of cooperation but one of the big flags that I mentioned in the book ‘Globally’ is the changing nature of work and the fact that in the 70’s and 80’s, it was the decades of mass employment and huge projects. Technology has completely changed the game of employment and at the moment, you’re getting the sort of CEO’s of classic companies together with Government, discussing things in fairly classical terms. What I want is to get the entrepreneurs together with the Government to design a platform for small businesses because I believe that today, 80 percent of the jobs around the world are being created by small businesses and new entrepreneurs. I want the Elon Musks of this world, the Adrian Gores of this world to sit down with Government to say, “This is the kind of platform that you will need to create to increase the probability of creating one million new businesses, which will create five million jobs.”

Have you looked at much of his work?

Absolutely. That’s exactly what he’s done, particularly with female entrepreneurs and the critical thing…for me, the statistic that says the flag has gone up is Uber in Australia where they are now in the top 20 employers in Australia. Obviously, the mining industry has declined but the point is everybody is their own boss in Uber. It’s a network rather than a classic company and my point is, “What are the kinds of equivalents to Uber and Airbnb in South Africa where a lot of people do not have the house to rent and they do not have the car to drive?” What other services could we possibly use – the Uber model 4 – in South Africa to create new businesses? The other thing I say is that each city in South Africa should have its own stock market, which I think should be virtual and it should be like Dragon’s Den.

You can put your business on the website and say, “I’m offering 20 percent for X amount.” Unlike the panel that sits around in Dragon’s Den, you can drive out and see the business and you can decide whether you want to invest in it. I think the highest probability of creating jobs is where you go from 10 to 20 jobs in a business rather than 100,000 to 200,000 in a big business.

It’s a brilliant idea. How do you get something like that going though when for instance, the JSE itself is very unhappy that it’s going to have competition? The new exchanges that are coming on are not looking at stimulating entrepreneurship. What you’ve said makes so much sense, but who’s listening?

Well, the point is this, Alec. That’s why I say, “Here is the flag about work.” The problem is…like schools, for example. They don’t have entrepreneurial programs at schools so they’re still training kids for the job market that existed in the 70’s and 80’s. It’s one of those terrible things that when a flag goes up that is outside the comfort zone of the decision-maker, you tend to be blind to it because it’s just inconvenient. One of my problems about the conversations at the moment between business and Government is that they’re not recognising this flag of the total change in the nature of work.

Do they even know it’s happening?

Well, they must. I haven’t stated something which is totally surprising in the book. We’ve all known for years that mechanisation has been driving a stake through jobs everywhere. Secondly, the whole employment model has changed from permanent work with pensions and everything, to contract work. I bet you there’s 155,000 jobs in the States that were created last month. Lots of them are on the Uber model, small business, or whatever and we’ve got to do the same here. We’ve got to have a proper conversation between the entrepreneurs and government rather than just traditional business. The second point I’d make is that the business associations in South Africa must be much more vocal because you can’t ask individual businesses to start putting up ideas which might invite a negative Government response. We all know what happens then. It’s up to the chambers, business leadership, and others to start a new debate about how we’re going to create a more inclusive economy.

Clem, if you could get into a time machine and go back to 1980 (ten years before the fall of the Berlin Wall), would one of these classical flags that you’ve been waving not be the future political leadership of South Africa? As a mindset, which is not going to be suitable for a new world i.e. comrade, commissar…all brought from the Soviet Union. So it’s almost like ‘that’s where I learnt my trade, so that’s the trade that I’m going to employ’. Would that have been a flag?

That’s an interesting question Alec, because in the book, ‘Flag Watching’, I say one of the things that opened the door on South Africa was the collapse of the Soviet Union because we all had a sort of ‘reds under your beds’ fear. I have to say when I saw Nelson Mandela in prison, just before he was released, he was so like a fox in the sense that he wanted to hear the new ideas about the global economy, so he was not into that sort of comrade frame of mind. He was ‘what works’? In fact, I remember him quoting Deng, “I don’t care if a cat is black or white, as long as it catches mice.” He was a very practical guy and I couldn’t look beyond Mandela. He was definitely somebody who wanted to be not only at the same place in the world but actually ahead of the world.

Yes, you are quite right. Those were the flags but I’m beginning to think that the negativity of the global economy, the perfect storm so to speak, is beginning to really, wake up people now. That all that kind of jargon and the ideology that went with that jargon is just no longer appropriate.

Well you’ve got the opportunity. Tomorrow night you are debating with Julius Malema. Now, reading Malema’s recent statements, and we took his press conference and transcribed it, and put it onto Biznews. You have got a Soviet-type philosophy. A Chávez follower, a man who is stuck, not stuck but he believes in that ideology. When he was asked by the FT over the weekend, we republished ‘lunch with EFT’, it was Julius Malema. He said that a role model for South Africa would be Cuba and perhaps Venezuela, so you’ve got a lovely opportunity.

Yes, absolutely, well let’s take Venezuela. Obviously, that is a very bad example. Cuba, interestingly the whole economy is reviving. Why, and I’m going to say this tomorrow night because there’s been enough space for Cuban entrepreneurs. Now, with the new relationship with the United States, the whole Cuban economy is beginning to look up. My point to him and I’m going to say to him. I’m as passionate and Economic Freedom Fighter as you Julius but it’s the way you create economic freedom. I don’t think nationalising the mines or the banks is going to achieve one extra degree of economic freedom for ordinary people.

It’s just going to give us a lot more taxes to pay, probably.

Of course, the Government will be taking on the risks and all that kind of stuff. The way you’re going to create jobs is to, actually say, “What can we do to our economy to create a level playing field, to get rid of all those silos around the township economies to take the best one thousand entrepreneurs that you have, who’ve run businesses in township economies for the last five to ten years. Give them the support, so that they can actually extend their geographical footprint throughout South Africa. In other words, someone like Richard Maponya did in the 70’s, and he said it at Oxford when he gave, I think, a very good speech to the Oxford unit. He said, “What we’ve got to create is real entrepreneurs. Not people who’ve made a lot of money because of their complexion but people who create.”

I’m going to say I’m in total agreement with you, and that is how you’re going to create real economic freedom in this country and I want you to tell me how you’re going to create those first million jobs. What is it that you’re going to do because that’s much more important than who owns what in the economy?

An interesting approach but if you go through the detail of what Malema believes in and what he speaks for is an enormous amount of racism. Is an enormous amount of antagonism towards what he calls ‘white South African capital’, which of course is what, appealed to the capitalists in the U.K. because, self-righteously, they’re not part of white South African capitalists?

Yes, I’m not an apologist for Julius but I would say this: he does distinguish between whites and white capital and white monopoly capital, and all those things. That’s what he’s against and, to be honest, I’m in the same box as him in a slightly different sense – in that this is a very, exclusive economy and it’s very dominated by big business. You just have to look at the malls. The malls around the country have exactly the same names. How do we create the same energetic retail space for small guys as we have in Lagos, as you have in Istanbul and you have in Hong Kong? What are we going to do, so that we can actually start really spreading our economy out to all the people who don’t participate in it, at the moment?

So what ideas do you have on that front, without giving him ammunition to use against you?

Well, I don’t mind giving him ammunition because as I said, I’m an Economic Freedom Fighter too. I’ll even wear the beret but I just want to get across the idea that the State playing a greater role in the business game is just inappropriate because politicians aren’t good business people. Good business people aren’t necessarily good politicians. I don’t think Steve Jobs would have made a particularly good politician but equally, I think virtually any president in the world or prime minister or head of state anywhere, wouldn’t be very good in business. They are totally different games, so what the Government must do is to, kind of change the rules in a way, which opens up the game to the small guys because it’s a flag. Eighty percent of the jobs in the world today are being created in small businesses, either independently or in the kind of Uber network.

As I said to you earlier on in Australia, it’s an incredible statistic that Uber have entered the top 20 employers in Australia.

I’ve just got back from Davos, where a focus was on the Fourth Industrial Revolution – 47 percent of the existing jobs in the United States will be gone in 2030. One-third of the jobs in the U.K. will be gone by that period as well, which brings a whole, new dynamic into play here. If you’re looking to re-employ or to employ people, if you’re looking to give people jobs and they’re being destroyed by artificial intelligence, robotics, etcetera, you must be fighting a losing battle. How do you get that mind-set shift?

There may be some foxes but boy, there’s lots of very big company bosses, and in my experience and my co-author Chantell, the bigger you are, the more blind you are to the flags that are changing your game. Small businesses or entrepreneurs – the reason they become successful is they adapt. I think they talk about the Fourth Industrial Revolution but I didn’t see anything, which suggested the kind of stuff I’m saying, which is you’ve got to put a lot more emphasis on small business and entrepreneur because most big business people don’t want the extra competition.

Well, they don’t even really understand what it’s like to answer a telephone, or to speak to the bank manager etcetera, which is a normal part of life as a small business.

I know that because I’ve worked at Anglo and now I work for myself.

Yes, you had both sides of the coin.

Yes, so I know both sides of the coin and I have to say that I thought work at Anglo would prepare me for doing exactly the kind of things that you do, which is pull out the phone, make sure that somebody pays you and all that. It doesn’t. Life as an entrepreneur is a very, different life and you cannot learn to be an entrepreneur unless you are one.

Isn’t there also, (while we talk about entrepreneurship), a bit of a bad rap for entrepreneurs. Often one hears politicians saying ‘well, you’ve got to make money’ – ‘you want to make money, so you’re being an entrepreneur’. There tends to be different drivers. Nowadays if you were to work for a big business, you would probably make a whole lot more money than you would working for yourself.

Absolutely, well as I said, it’s a tough global economy and I would just like, in a second, to give you the South African scenarios against that tough global backdrop but I agree with you 100 percent. That when you talk to intelligent young people they say, “Come on Clem, you’re asking me to risk money on a small business, when I can get a job with that consultant or I can go to a law firm or I can go to Anglo American. By the time I’m 30, I can be up to R800 thousand a year. Why would I want to risk things on small business?” Now, how do you overcome that argument? The answer is, with difficulty.

I was at Wits Business School last week, there were 200 people at the presentation, and I asked for a show of hands, how many of them would be starting their own business. I think there was six out of those 200, and that’s surely, where it starts.

Yes, that is surely, where it starts and that’s why I’m saying I find it incredible that educational institutions like business schools, universities, but absolutely primary and secondary schools, haven’t seen this flag of the changing nature of work. The fact that they should be preparing kids to become entrepreneurs. In fact, there was one school in South Africa who, 20 years ago, made their kids run real businesses in the year before matric, and I thought that was a brilliant idea.

You mentioned that in your book – Wykeham Collegiate and Hilton College. Those two are Pietermaritzburg schools. What was the consequence of that program?

Well, I’ve never spoken to Ann (Wykeham Headmistress) about how many new businesses were created but I just thought that is the way everybody should go. Not just in South Africa but also around the world because actually, a lot of people have ambitions to get jobs, leaving university. If you look at the statistics around the world, a lower and lower percentage actually get jobs. I mean youth unemployment is very high in Europe. I think in America it’s a more resilient economy and people are programmed more to be entrepreneurs, so they have unemployment rate of four-point-nine percent, whereas Europe is over ten. I mean, here we are sitting at 25. If you want to bring the rate down from 25 to 10, you’re going to have to create millions of new businesses. It’s not going to be new minds and new, big industrial enterprises. There’ll be one or two, but it’s not going to change the game.

Getting back to the book and to South Africa, and the flags that we need to watch from this country’s perspective.

Yes, for me, I helped the Institute for Risk Management of South Africa to develop scenarios, and they automatically have lists of the risks that people should watch and they wanted to do a scenario game board, so together with them we designed a game board at a workshop. Yesterday they did the first presentation on this scenario game board and for me it’s brilliant because what they had as the vertical axis of the game board was whether you have a stable, growing global economy or an unstable economy, with increasing risks attached to it. I would, on that one give 80 to the risky global economy and 20 to the top one.

Unstable?

Then they had resilient South African economy or vulnerable South African economy, on the horizontal axis and that gave four scenarios, and they used the mountaineering analogy. They had ‘sunny summit’ for the really good one, where we do change the game in South Africa. We get our economic model right and it’s against the backdrop that the world finds a new technology, like robotics – more intelligence robots or smart energy, and grows its way out of trouble. The second one was ‘missed opportunity or missed window’, where you don’t take the clear weather to get to the top of Everest. You miss it but it’s not got too negative an implication. The bottom of the game board had on the one side ‘steep climb’. That is where we get it right. We become more resilient against the backdrop of a pretty, tough global economy and I think it’s such a good analogy because you require expert people to make the climb.

Nobody climbs Everest without a lot of knowledge. You obviously, have to operate as a team, and you’ve got to put in a heck of a lot of effort. That’s where we are. The last scenario is ‘avalanche’. It’s where something happens, which basically takes the snow level from around your knees to above your head. We call it ‘avalanche’ and I would say being one notch above junk status for Rand Bonds is a flag for the avalanche scenario. You’ll have little avalanches and then you’ll have a big avalanche, and I give an 80 percent chance that we’re on the bottom side of the game board. I split that 80 (40/40) between the steep climb and getting our act together because there are signs that, as you said, positive about Government meeting business. To say we can do far more to get into that scenario of a steep climb but there is also a good chance that we could have an avalanche.

Probably meeting wrong business though, as you described it. Clem, the big question for many South Africans today is we have our neighbour just to the north, the avalanche scenario – would you really put it as high as 40 percent? That we would be swept away and presumably, what you’re talking about there is becoming another Zimbabwe?

Yes, when I use the conventional language of ‘failed state’ I talk of ten because of the resilience of our institutions, so it’s more about having a vulnerable economy, which simply… It’s not the kind of a dictatorship scenario and it’s not a Somalia civil war scenario. I’m just talking about a very, bleak economy where unemployment rises even higher. You have more civil unrest, and so forth and so on. Yes, I can give that scenario, which is not as deep a hole as a ‘failed state’. I think we’re at the second economic crossroads. The first one was the political crossroads in the early 90’s, where we negotiated a reasonable constitution. We are now at that second economic crossroads and I have to say Bobby Godsell and Michael O’Dowd, when they did the original ‘High Road – Low Road’ material, and I show the diagram in the book. It had that second crossroads 20 years after the first one, and here we are.

Right in it, and that’s why I want a proper conversation about restructuring the economy. Not just a kind of comfortable conversation between CEOs and Government, and I also want to have a public discussion around it and I certainly don’t mind if Julius Malema, in his own way, joins in this discussion.

Yes, that’s what I talk about but I’ve put that idea forward for quite some time, Alec, the idea of an Economic CODESA, but I’ve come to the conclusion that I want to get a handpicked group of entrepreneurs, who have really done it in South Africa, like Brian Joffe.

Yes, Joffe wouldn’t have gone along to this meeting with business. Certainly, Elon Musk wouldn’t have been invited back from America. Steven Saad I guess, was probably not in that room but you will find that professional managers that did engage with Government. At least that’s one-step in the right direction.

Let me ask you, and I don’t know because I don’t know who was in the room. How many of those people in the room created the businesses they work for?

Good point.

That’s, to me, I wanted to only have people who have created their own businesses and I would invite Elon Musk back from America. I would say this is a very critical conversation in a country you grew up in. You went to Pretoria Boys High. You’re now nominated as the most powerful entrepreneur in America. Please come back and help us to work out how we can create people like you here, in South Africa, with the appropriate platform. Knowing full well that entrepreneurs aren’t replicated. They tend to be one-off but you can increase the probability that they will come forward. I always quote Steve Jobs. His father, his genetic father was a Syrian and, yes, America got probably the biggest game changer of all time, in Steve Jobs. We’ve got a few major game changers in the global economy here and we have a pretty good record.

I just want to increase the probability of that because that is the way you increase jobs. I have to say though that, in terms of the rural areas and lots of the small businesses, we’re not talking of those kinds of guys. We’re talking about how you can create, as I said, a kind of network of small businesses to carry out services and use applications on mobiles and smart phones, like Uber, in order to make it a very powerful model for all the services that we use. I would also have, I’m not sure whether a regulation or a guideline, that 20 percent of the supply chain of any business beyond a certain size in this country should be dedicated to the nurturing of small business suppliers.

Clem Sunter, author extraordinaire, futurist fox – his latest book is called ‘Flag Watching’. How a Fox Decodes the Future’. It’s published by Tafelberg, but I guess once you’ve read the book or once you’ve seen him in action tomorrow, with Julius Malema in Cape Town. It will make the book even more appealing. As always, Clem, it’s been a privilege. Thank you.